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Things I wish Id known...

Insights and inspiration from the journeys of successful entrepreneurs

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Contents

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Contents Foreword Introduction Professor Peter Denyer Professor Jeremy Stone Steve Purdham Sherry Coutu Marc Moens Gwyn Humphreys David Tatchell Alasdair Rawsthorne Dr Ian T Muirhead Jed Hurwitz Dr Andy Richards Alex Hoye Ernie Richardson Ian Underwood Sir Robin Saxby Adrian Critchlow Acknowledgements

Foreword

The testimonies you are about to read speak volumes about the level of entrepreneurial talent in this country. Here are 16 incredible success stories that indicate we have the appetite and the skills from which to build world-class, innovative businesses in the UK. They also illustrate that the path to success is not an easy one there is always something we could have done differently. They suggest the need for relentless persistence from the entrepreneur persistence that can absorb consistent losses, huge amounts of loneliness and the presence of people telling them it wont work. At the same time, the best entrepreneurs are those who dont just heroically go it alone but understand the importance of team work and collaboration, especially when it comes to company growth, and who build a strong network of contacts and mentors around them. This is where government, venture capitalists and all those involved in supporting and developing entrepreneurship need to play a bigger role. We must learn from the experiences of those who have made it and work harder to break down the barriers that prevent even more successful businesses from emerging across the UK. At NESTA (National Endowment for Science, Technology and the Arts) were committed to supporting seed stage companies and actively invest in some of the very best early stage technology businesses in the UK. We have a portfolio of over 40 companies and are seeking to invest 50 million over the next five years in to the seed stage. We cant do this alone. We are working towards the continued improvement of investors operating in this space both in terms of fund size and managerial expertise and we want to see more individuals who will not only reap their own success but be an essential ingredient in the success of the UK economy. If you would like to comment on any of the articles or have your own story, or over time would like to read more lessons from other great entrepreneurs go to www.nesta.org.uk/ hindsight Jonathan Kestenbaum CEO, NESTA October 2007

Introduction from the editors

If youre reading this booklet you are either an aspirant entrepreneur seeking guidance or inspiration, a successful entrepreneur seeing what worked for other people like yourself, or one of the many spectators who observe entrepreneurial people with a mixture of bewilderment, envy and admiration. Whichever you are, we hope you will find this booklet of use, or at the very least of interest. Entrepreneurialism is a profoundly illogical business, involving as it does prodigious hard work, enormous strains on personal finances, and often relationships too, and with a high risk of failure bringing all the associated stigmas. On any rational basis nobody would embark on a business start-up; particularly involving new technology. So, why do they do it? Because, as these individual stories tell, at some deep psychological level they have to. Entrepreneurs are a strange and bewildering species; men & women, young & old, inspirational & perspirational, methodical and sometimes just plain lucky. However what unites them is the journey. What we have attempted to do in this booklet is to assemble many different stories about entrepreneurial journeys and have deliberately sought to focus on the emotional rather than the practical. This is not a how to do it textbook, but we hope it might be a why to do it guide. We asked a broad range of technology entrepreneurs, many of them involved in spinouts from universities, to provide a short letter addressed to an unknown aspirant tech entrepreneur, offering insight into the personal aspects of the start-up journey. We have imposed no constraints on the content of these contributions, other than a preference to avoid any litigation for libel! These are their own words and in our view each of them makes compelling reading. We believe they contain genuine and valuable insights into what it takes to embark on the journey, but also how rewarding it can be at a personal and emotional level. The title was chosen half expecting that one or two might not have undertaken the journey had they known the demands it would make. The surprise for us is the almost unanimous view of all contributors that the journey more than justified the cost. Furthermore, how many have now embarked on another journey in pursuit of another project that may change the world in some way. We salute all these contributors and all the other entrepreneurs who share this ambition for change, and we hope that this booklet might make a small contribution to encourage others to take the first step. Editors Ernie Richardson October 2007 Peter Denyer Sherry Coutu

Professor Peter Denyer Like a host of things great food, for example reading about it is no substitute for doing it! Besides, writing about something so intimate as the company I grew, and lived and breathed, is going to be hard, isnt it? It turns out not to be I must have learned a thousand lessons in growing and managing my business. Below are simply the first few that spring to mind. Problems Without wishing to make it sound like a game show, life as an entrepreneur is a continuous series of challenges. Lots of them. All the time. That word challenges wasnt chosen for its linguistic programming effect; it is actually how I came to see things. The mental process is fascinating some people believe it can be taught, but I think it has to be learned. It goes something like this: today a key supplier has warned you that a component will be four weeks late. One reaction is that the sky is falling, and this will be the event that is going to finish the company. An alternative is that you have faced problems on this scale every day for as far back as you can see, and guess what you and your company survived them. You may not be sure how, but you seem to have the knack of doing so. I have no idea, writing this, how you will solve todays problem, but if youve survived this far, then its habitual. Therefore, there is no need to worry about survival you dont have to waste any brain time on it. Now, apply said brain to the problem in hand, and tomorrow youll be looking back on this, another problem overcome. Its like a boat hitting a wave the situation looks dreadful, but like five hundred waves beforehand, buoyancy wins again, the boat bobs up, the wave has passed. What Im trying, badly, to say is that you can and must naturally learn how to cope with continual stress, and to understand that there is a mental plane on which you can do this.

Peter was the founder and CEO of Vision Group plc, the Edinburgh-based creator of CMOS Imager chips used widely in digital cameras. Vision was a successful spinout from his research at the University of Edinburgh. Peter served as CEO of Vision from its inception and early stages in 1990, to its UK IPO in 1995. Vision subsequently grew as a mainstream fabless semiconductor company shipping millions of units, before eventually being sold to ST Microelectronics in 1999. Peter is Executive Chairman of recently listed MicroEmissive Displays Ltd and was the co-founder and Chairman of Rhetorical Systems.

No matter how hard you try, you cannot communicate enough.


Communication No matter how hard you try, you cannot communicate enough. Provided youre communicating things that matter, everyone appreciates it; suppliers, investors, staff, customers. In hearing you discuss the business some of your enthusiasm will rub off onto them each time. If youre giving some insight into a problem a listener will naturally start to take some ownership of it; they may even suggest a solution. At the very least their new knowledge will affect anything they do that might be linked in any way. Im a naturally bad communicator, and it embarrasses me to admit that I have to force myself to do it. But almost every time I pushed myself to communicate I got a positive return on it. You should always take an opportunity to have a word with someone; even the simple fact that youve recognised someone, and taken an interest, can give a boost. Once your business reaches a certain size, perhaps 50 or more staff, its hard or impossible to maintain frequent personal contact with everyone. An alternative then is a regular update of some kind from you. A weekly state-of-the-nation email to everyone inside the company is one solution; monthly news gets a bit too stale. There is no need to waste resources in making this glossy but people really value being told about developments, and even about problems. This is also a great way to militate the rumour mill. If youve stated a position, or your view, there will still be rumours but theyll have much less currency. There is another, deeply frustrating aspect of communication that I never managed quite to get the better of; getting your staff to communicate with each other. I cant offer a cut-and-dried solution here. I can only tell you that in a project requiring lots of communication between, say, two design engineers, they will probably not communicate even if you seat them within five feet of each other. The best you can do is to assume that communication, or at least the right degree of it, isnt happening. Try checking to see if it is.

Before long (hopefully) youll have grown an executive team, and they must communicate also. Generally this isnt such a problem people at this level understand the importance of communication. A weekly informal meeting is a good idea a time in the week when the top team try to be in the same room to discuss anything and everything that is happening in the business. As far as Im aware this works well for businesses as large as the largest FTSE 100 companies, and as small as yours. Gratitude An odd topic, I know, but an important one. Rather, its important to know that you shouldnt expect any. In my own business during its nine-year lifetime (exactly the UK average time from start-up to exit, by the way), I can count on one hand the number of times I was thanked, ever, for anything. This isnt sour grapes. I think none the worse of anybody for it; they simply dont see things that way. If anything they are doing you a favour, and your rewards will be great enough (they believe). Perhaps I didnt do enough thanking myself, though I believe I tried and I encourage you to do so. So youve been warned, and thats all that is intended here.

For a company to survive and grow, its shape must change quite often.
Organisation (and change) For a company to survive and grow, its shape must change quite often. You should think about reorganising about once every 12 months. People should get used to this, and see it as a healthy process, not as a personal threat. There is no point here in defining a perfect organisation it doesnt exist. Though you can change the existing one for the better. Inevitably changes will threaten some individuals (though this should be the exception rather than the rule). This can be tough, but you must learn to face up to it if changes are for the greater good of the business as a whole and, therefore, for the majority of its staff. The only practical advice I can give is that no matter how bad the news, whether it be the removal of some cherished role, or even redundancy, people appreciate being spoken to face to face, and being told honestly why and what is happening. It seems almost absurd, but I have had subsequently friendly relationships with colleagues that I have had to ask to leave the business. It sounds like a platitude, but often such a move is in their interest as well as that of the company. The most difficult day Unsurprisingly there is a lot of competition for this one. A fairly clear winner however is the day, following nine years of exhortation from me that it was us-against-the-world, I gathered together my staff to announce that the business was being sold. I hope you have one of these days!

Professor Jeremy Stone I Wish I d Known I would one day be asked to write an open letter like this; it would have given me succour in hard times and, believe me, there were many. In fact, times are not necessarily easier now, just different in large part because an entrepreneurs mindset is not one that changes easily. The over achiever-neurotic thrives on the shortlived thrill of success and the terror of failure. The stakes and rewards may differ the drivers are mostly fixed. Recognising ones flaws, ones motivators and that one sees the world in sometimes different ways can be reassuring; it helps partners understand your sometimes odd behaviour too I wish Id known that not everyone is an entrepreneur, no matter what it says on their business card. I wish Id understood better the informal rules of the game, rather than assumed enthusiasm and youth would triumph most people offering money dont deliver on their promise. In contrast, it took several turns to learn not always to take the first offer of funding. In parallel, I discovered the hard way about shareholder registers as long as limbs.

I wish I had known that not everyone is an entrepreneur, no matter what it says on their business card.
I wish Id understood better the importance of high quality, trusted professional advisors Ruskins saying never to buy on price alone is wise counsel. A lawyer who understands your quirks and follies, yet adds a truly commercial perspective is a godsend. Ditto accountants and corporate financiers. They would have helped me understand that less is often more simple stories, well told, engage investors. Equally, share structures and investment documents only advisors can interpret, probably signal troubles ahead. I wish Id valued muck-and-brass opportunities many have passed me by and become successes. I fell victim more than once to ego in this and many other areas humility is a core skill.

After an academic hospital medicine career, research in aviation medicine and business school, Jeremy worked as a senior strategy consultant at Gemini Consulting, Inc. with numerous healthcare care systems and pharmaceuticals, before becoming CEO of US-based global pharmaceutical outsourcing firm, Snyder Healthcare. Since 1999, he has created more than a dozen successful healthcare and investment companies, including Medical Futures, Mediary and Lattice Growth Partners. Jeremy is Founder and Chairman of Merchant Ventures Investments Ltd, which is acquiring niched fund management and financial service firms to create a next generation bank. He also recently became Chairman of Communication Direct Ltd, the UKs leading 3g mobile reseller and HSBC Best New UK Company, 2006. Jeremy maintains academic affiliations at the Welsh Institute for Health and Social Care, University of Glamorgan where he is visiting Professor in healthcare, technology and enterprise.

I back the team now first and foremost.


The power of the team is something I preach but have forgotten all too often. I back the team now first and foremost. On starting out I assumed the idea took precedence. I wish I had known the dangers of thinking too wide and too far ahead, rather than dealing with todays issues. A better understanding of the 80/20 rule would have done no harm either I have delayed launching products or services too long in search of perfection. I should have valued more the importance of legacy over financial reward working for the latter rarely brings the former. I wish Id raised more money than I needed and worried less about the dilution instead Ive endured painful renegotiations when cash ran short and seen my stake ultimately worth less.

I wish I had learned to communicate better in all directions.


I wish I was less seduced by the idea of an IPO magical words that mean colossal and distracting workload, only to expose your business to investors and analysts with often scant interest in anything other than the short term and the quick buck. I wish I had learned to communicate better in all directions, and felt confident to repeat the message when I believed it was clear in equal measure. I wish I had understood the value of simplicity of message to fast-growing firms, over Blue Sky strategy; and avoid management-speak at all times.

The journey is often superior to the destination.


I wish Id started younger and I wish I appreciated how much family and friends would support me beyond what was reasonable or fair. I wish Id known it was OK to have fun and in so doing not taken myself quite so seriously the journey is often superior to the destination.

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Steve Purdham If you have ever tried to guide a teenage son or daughter through the minefield of life and help them from making the same mistakes you made, then you will know that the ensuing tantrum and abuse quite often leaves you confused and in despair.

Opinions are like backsides, everybody has got one.


As a species we seemed to have developed a mental block to such advice as a means to ensure that experience is the only way to really understand. So venturing into the world of someone elses Things Id wish Id known in their business life is immediately fraught with problems, and actually that is good because I have to start my eulogy with two warnings. Beware of perceived wisdom! pinions are like backsides, everybody has got one (we will come back to this one later) O So the following is my personal experience and you need to dismiss all or some of it as you see fit, enjoy. So Things I wish Id known, for me, fall primarily into the emotional aspects of business life rather that the standard quantitative and process driven elements of business. All business issues will fall into the hoppers of People, Process, Technology and Policy. They can be solved and taught with time, effort and understanding (zzzzZZZZ) but for me its the emotional aspects which are things that seem to bubble under the surface of your execution until there is a sudden eureka moment. Quite often it turns out (as always) to be common sense but hey, some of us are more common than others. So lets dive in.
Steve is currently CEO of We7 (www. We7.com), the new free digital music destination. He originally founded SurfControl plc, a global internet security company, which was recently sold for just over $400 million. Steve has been recognized by many prestigious business awards, including: IOD Director of the Year, Technology CEO of the Year, Technology Entreprenuer of the Year, and Techmark Personality of the Year.

Avoid the negative In building and running a public technology business you are faced with reporting your numbers and strategy to the shareholders every 90 days. This puts you in front of financial journalists on a regular basis. The eureka moment for this one came when, after reporting quarter after quarter of success for years, I became frustrated that we never seemed to get any significant column inches in the business press. So I asked the journalist Why? and the reply was illuminating Steve, give me good news and I will write a paragraph give me bad news and I will write a page. Sadly, this is the world we live in and we are surrounded by constant reasons why not to do something, how difficult it will be, youll never be able to do it that way, etc. The British culture seems to amplify this more than most cultures I have met over the years. Whether its down to the old class system, when it was seen as almost a sin to try and better yourself I dont know, but despite the many false smiles and words of encouragement, it is a fact that we live in a negative and unhelpful world and that is the world that as an entrepreneur you have to navigate. Its simple to test this; ask anyone how they are and on the whole you know what the response will be gloom and misery. I always answer Brilliant Fantastic; its amazing the almost shocked look you get! Try it!

Trying and winning is much better than trying and failing, but doing nothing is always a fail.
Failure is acceptable There is an implicit fear of failure in the UK and the potential stigma associated with it basically freezes most people into a state of indecision and paralysis. When Rob Barrow and I tried to get funding for SurfControl, we failed for almost two years seeing VC after VC after VC, Nomad after Nomad after Nomad, etc. Failure is not wrong if you have failed you have at least tried and that, in business, is the most important thing you can do. Ill admit that trying and winning is much better than trying and failing, but doing nothing is always a fail so find that belief and go for it.

Decisions Make them and remember that a decision is for now, not forever. Too often people either dont make decisions, or if they do, they stay with it forever. This is a fact for most people and either you get frustrated or you help people. The reality is things will change and you have to adapt. I remember overhearing a new employee in our Boston office being taught a process by an existing employee. The new employee questioned the way we did the job, and the response was Weve always done it that way, at which point I had to intervene; we hadnt always done it that way as the department didnt exist three months earlier. The decision that had been made was right at the time but that was then; things change so be open-minded and move on. Just Do It Learn to trust your instincts One of the biggest frustrations I have had in business is why things take so long when there is no reason for it and I eventually realised that the biggest gap in deciding to do something and then doing it is the justification period. When people try to make decisions or (eventually) make decisions, lots of time is lost before they then execute. This time is lost as people look for all sorts of ways to support the decision that they have or are about to make. If you think about the last big decision you made, your instinct would get to the answer almost immediately, the rest of the time is then spent in justifying your decision. I learnt you can make decisions faster and get to the just do it bit extremely fast if you spot when the work you are doing is not for quantitative justification (which should still be done), but rather than qualitative reasons to make you feel that you have made the right decisions. If this can be done properly, you dont save trivial amounts of time you can save months or years in projects and execution.

Choose your friends and advisors with great care.


Keep the faith, stay focused and believe I said at the beginning, opinions are like backsides, everyone has one. As you grow you will be surrounded by advisors, consultants, lawyers, NEDs, corporate financiers, accountants, etc, etc. Many are excellent, but some more excellent than others and they all have opinions. Quite often these opinions, by their nature, cross the line from the factual advice that you need to make a decision, into the polarised views of an individual who will probably have never been in your shoes. You may need help in specific areas but your position of command requires that you own the decision and you have faith in your vision and execution. So choose your friends and advisors with great care. Translating funding speak Over the years I have been involved with raising hundreds of millions of pounds in funding. But I wish I had one of those Berlitz phrase books when I started off. The two phrases I have learnt to watch out for are Good Luck, let us know how you get on and Great idea, but we would like to see a little more progress. The first is an obvious no as VCs dont like saying no just in case they got it wrong. And the second great favourite of mine Great idea, but we would like to see a little more progress means I am not prepared to take the risk. Go and do what you said you would do if you had the money (but without the money), and then come back when there is less risk. VCs and investors on the whole dont know that they are doing it, but you can end up doing a lot of pointless work trying to Make Progress. There are many such phrases; dont let them put you off. Just be aware of them and roll with the punches.

Always take a moment and celebrate the small achievements for yourself and your team around you.
So that concludes my little journey of discovery. If you are still with me at this stage I assume you will be ready to give me the teenage tantrum and abuse, but whatever happens in your journey, always do one thing - always take a moment and celebrate the small achievements for yourself and your team around you (who at the end of the day are the people that really make it happen).

Sherry Coutu I am pleased that you are considering starting up your own company. I cant begin to describe how rewarding an experience it can be. I would very much encourage you to embark on the road assuming that you are sure that it will be something worth doing.

The company you are starting has the chance of solving someones problem.
What do I mean by worth doing? I mean that the company you are starting has the chance of solving someones problem. Better if that problem is a big one! Excellent if the problem is big and the number of people who have this problem is huge and growing! In my experience, if you are solving a big problem for a customer, then it is easy to attract people to your team and to motivate them to focus on solving the problem. It is easy to become seduced by an idea or a scientific breakthrough or a cool technology that has no proven (or conceivable) customer demand for it. Must have solutions are so much more compelling than nice to have solutions. It has to be something that you think is going to get you out of bed in the morning and keep you from going to bed at night for, well, the best part of a decade. You need a great team with one you can achieve the impossible Successful businesses require a team. Big problems require a team because if the problem is worth solving, it will surely take a bunch of people with complimentary skills to address. Another benefit of a great team is that you make great friends as you solve more and more customer problems (and are more and more successful). I am still working with the folks from the first company I founded. Five years on from the exit, we still enjoy solving problems together. Sometimes the problems we are working out are with companies I have invested in, sometimes with the companies they have subsequently set up, sometimes with the companies they have invested in. Solving problems is something entrepreneurs do.

Sherry pursues a portfolio of interests, which include early-stage technology investing and serving on the boards of companies, charities and universities. Sherry established and successfully exited two financial services software companies: the first was acquired in 1997 and has operations in more than 70 countries and the second was floated on NASDAQ and the London Main Market in 2000 and serves 1.7 million retail financial customers in the UK.

An entrepreneur listens to evidence and then makes decisions based on educated guesses.
If you feel something, you are probably right One of the best pieces of advice I had from one of my mentors was that an entrepreneur listens to evidence and then makes decisions based on educated guesses. He said that those who were capable, but ultimately unsuccessful in business, liked to analyse things from every different direction and then reflect for a long period of time and then gather more information to check before acting. He said that it was a transition everyone needed to make as they moved from the academic world to the business world. This is also something that is alluded to in the book Blink by Malcolm Gladwell. Dont procrastinate! Just do it. Far better to make a mistake than to miss the opportunity and let someone else win the customer. Timing the window is critical Something I was taught in business school and have been lucky with since is timing. If you set up the company to sell it (which, if you are reading this BVCA publication, must at least be something you are considering), then you must be mindful of which companies might have an appetite for buying a company like yours. You must also be mindful of what your competitors are doing. If all your competitors get bought by the likely acquirers, then you will miss your window to sell your company. Another window might be a very long time in coming or might not come at all. Keeping a close eye on the target acquirers and competitors is something you should get from your independent directors, VC backers and angel investors.

It takes more time than you will think I had to laugh recently when a friend of mine (also an entrepreneur) reported I am on the seventh year of a two year project. He had floated his company, and was still very passionate about it. Customers dont always adopt things as quickly as you think they will... even though they should! Different investors have different agendas and interests you need to reconcile them Before I floated my company, angels, VCs and trade investors had invested. I did not realise at the time the extent to which the interests of these parties could differ or the amount of time that it would take to reconcile them so that I could get the company through the next stage of its development. Make sure that you anticipate this and that you work out how to pull them into alignment beforehand so that there is no chance their non-alignment can derail a sale/IPO. Angels/Trade Investors are great! Angels/Trade Investors are horrible! I had some terrific and some terrible angels in my companies and the companies I have invested in subsequently as an angel investor. One thing is clear: Angels are not created equal! My best angel story revolves around one angel who had been involved in setting up more than 70 companies and had floated 20 of them he helped the company through everything including the IPO and subsequent acquisition of the company. I have also seen some angels too busy running a portfolio of their interests that they did not have sufficient time to devote to the company. These types slow down the company and ultimately it is best to ask them to leave the board. The same things can happen with trade investor representatives. Lesson to learn: make sure that the persons on your board have the time and inclination to help you grow your company as quickly as the opportunity will allow. VCs are great (my own) VCs can be terrible (vicarious) I was lucky with my own VCs. They were super smart, experienced, ambitious and great people. They created all sorts of opportunities for the company and helped us overcome a variety of obstacles that are experienced when companies grow very quickly. On the other hand I have a variety of friends who are entrepreneurs and have not had the same experience. Be very sure about the value your investors can add and make sure you ask the entrepreneurs who they have backed, how they add value and what they are really like after the deal has been done. There are also sites which help you see what other entrepreneurs think www.thefunded.com. Another thing to bear in mind is that there are many people who will claim they can help you get financing. Bear in mind that for them, it is just a deal that they will make commission from; they will not need to live with the consequences for decades.

Cash is King.
Forecasting is something that needs to be done all the time is there gold in them there hills? It is even more important after funding to check the information you put in your business plan forecasts is correct. Is the pricing right? Adoption as you thought? What about retention? Otherwise, you may find that you run out of the money you raised faster than you anticipated. Cash is King and you really really really dont want to try to raise money when you are out of it. If you are a great scientist or deal-doer, then make sure you get someone on your team who can keep track of the cash.

Business is a marathon, not a sprint.


It is hard, but not impossible to lead a balanced lifestyle Given that I have chaired board meetings from the labour suite of a hospital and I was five months pregnant with my second child when my company IPOd, it seems a bit rich making this statement, but it is important to try. I dont think it is really possible to keep things in balance everyday, but try to keep an eye on it. You will always need your health, family and friends and you will be able to keep up the marathon if you maintain them. Business is a marathon, not a sprint. If you dont try, you will never know It is hard to describe what it is like to have millions of customers using the services of a company that you created. It is also hard to describe what financial independence feels like. It is also hard to describe what it feels like to know that most of the people who backed you made a lot of money from doing so. Just suffice it to say, it feels really good. Go on, give it a go! There are a lot of really big bad problems that need to be fixed and you might be in a superb position to make a really big difference to the world we live in and will leave to our children and grand-children. How good would that feel?

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Marc Moens When you are about to start a company, just as when you are about to invade a foreign country, there are, to quote Donald Rumsfeld, known knowns, known unknowns, and there are unknown unknowns.

As your company grows, you make sure your skill set grows.
Known unknowns This is the easiest category. There are doubtless a lot of things you know you dont know. However, when you know you dont know something, thats actually quite good. When I started, I knew I didnt know anything about financial reporting. That turned out to be less of a problem than I had anticipated. As your company grows, you make sure your skill set grows. And then you reach a point where the company is big enough to hire someone who can take over this task and who is properly skilled to do it. In my case, we got a finance director after our first funding round. Until that point, I did the financial reporting to the board and to the target investors myself, with a lot of help from my mentor and our friendly accountants. It wasnt a big deal; it was a known unknown. So known unknowns are, kind of, easy. But they are important, because there are so many helpful people around, and you need to make sure you call on the right people at the right time with the right questions. I remember early meetings with representatives from organisations that assist start-ups. They said We can help you with X, Y, and Z. Do you want to come on a course? I said Actually, I need help with A, B, and C. They said Hmm, interesting. Anyway, we can help you with X, Y, and Z. Do you want to come on a course? Knowing what it is you dont know and where you need help is important. Known knowns That there are known knowns may seem obvious: perhaps you are the world expert in cold water ducts, and thats what your company is going to be about. So thats a known known.

Marc co-founded Rhetorical Systems in 2005, which developed leading edge textto-speech systems. In December 2004, Rhetorical was acquired by ScanSoft, a US-based speech company. Marc left ScanSoft in 2005 and since then has been involved as an advisor in a number of IT startups. Marc graduated with a PhD at the University of Edinburgh where he ran the Language Technology Group and worked on information extraction, text summarisation and other language engineering technologies.

The only way you can decide whether it is worth giving all this up is by having a clear idea as to why you are doing it.
But before starting a company, there is a more important issue that I think people should turn into a known known, and that is your reason for starting the company. I dont think there are good or bad reasons, but you need to know what your personal reason is. Setting up and running a company is an all-consuming activity: you will spend less time with your partner and your children than you imagine; your holidays and weekends will be different from those of friends who are not doing a start-up. If you think work is something that you have to do while youd rather be doing your hobby, then you are likely to become unhappy in your start-up. The only way you can decide whether it is worth giving all this up is by having a clear idea as to why you are doing it. It could be the money, although I think there are less risky and less time-consuming ways of earning reasonable amounts of money. It is more likely that it is something you need to get out of your system proving to yourself that you can do this. Or youve spent a lot of time thinking theoretically about a bunch of problems and you now want to show this has some practical use. Or perhaps your career has reached a plateau and the only way you are going to move up or remain sane is by starting your own company. Whatever your reason, make sure it is a known known, so you can remind yourself over the years why you are doing this. Another thing you should make sure you have very clear, is knowing what your role is and what the role is of any co-founders. For example, a tech start-up might need a technical brain who has invented version 1 of the product and is already dreaming of version 2. You may also need an engineering genius who can implement and deliver version 1.1 and then version 1.2 and 1.3, and who will make sure the product has

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documentation and is robust and runs on different platforms. This person is probably different from the technical visionary. You will also need someone who can sell the vision behind the company. This goes beyond talking about the brilliance of the technical invention or the robustness of the first prototype; you need someone who can deliver the vision to potential investors, to landlords who think its too risky to rent out space to a start-up, to potential employees who might be taking a risk joining an unknown venture, and to customers. You also need someone who can turn the technology into something the customer wants to pay for. It is unlikely that a single founder can do all these things. You need to know what you know, you need to know what should be your role in the company, and, if you have co-founders, you need to know the responsibilities of each of your co-founders. The founders are likely to have an equal stake in the company, but it shouldnt follow from that, that there is no hierarchy between them when decisions need to be made. In the scenario above, you would need to decide if the engineering genius can overrule the technical visionary, and whether the latter can overrule the customer-facing evangelist.

Getting some of these apparently small things wrong can have very visible consequences.
If you are the sole founder, or you are the leader of a team of founders, it may come as a bit of a shock to realise that nothing in your brand new company will happen unless you make it happen. This isnt just about designing the product and having a sales strategy and attracting customers and shipping a product on time. Its all the other things you may have taken for granted in your career so far: having a staff manual and a policy about statutory holidays, arranging work permits for new employees, making travel arrangements to go see a customer, making sure there is paper by the photocopier, and that the wastebaskets get emptied. In fact, making sure that there are waste baskets and desks and chairs. If youre in charge, you have to make sure all this happens. Getting some of these apparently small things wrong can have very visible consequences. Because of that, the small things may start taking up time and attention, which you should be spending on the more important things. So make sure you have someone alongside you who can organise this, and a lot more, without even needing to be asked. Unknown unknowns Amongst the things I didnt know I didnt know, is the importance of having a mentor. When you start your first company, you need someone who has been through it before, who is willing to stand by you, who will listen to what you are trying to do, who will step in when necessary and be invisible when thats appropriate; someone who can give advice on small, practical issues, comment on larger strategic issues, or offer advice on life issues. At my first company, we were lucky: we didnt set out to find a mentor, but a mentor found us and became our chairman, or was it vice versa. Its important you find that mentor very early on in your start-up process. And dont wait for it to happen by accident. Make it happen. There was one major unknown unknown at the start of my first company: the market for our product was a lot more complex and fragmented than I had anticipated, with an intricate eco-system of large and small companies providing all or part of a solution to which we only contributed a small component technology. This made it quite hard to get traction in this market or to get lock-in with customers. We did well in turning this restriction into a unique selling point, but it was harder than anticipated.

Education is the path from cocky ignorance to miserable uncertainty.


I now always recommend that people try and understand the market eco-system they are entering with their new product or their new company. However, if I had known then what I know now about the complexity of this market we entered all those years ago, I might have decided not to start the company at all. Mark Twain said that education is the path from cocky ignorance to miserable uncertainty. When you start a company, cocky ignorance is not necessarily a bad asset.

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Gwyn Humphreys Bradford Particle Design (BPD) was a huge amount of fun, but was probably the most total commitment activity of my life and in embarking on setting up and running your own company, one of the key things you must bear in mind at the beginning is that your family will need to be very understanding, and long-suffering. They will bear the brunt of all the bad things that happen (and there will be plenty of those, even in a successful company), and also you are likely to be away much of the time, whether it be late nights or travelling. However, the joy and huge satisfaction that comes with success is what it is all about and the competitive nature of academic research should stand you in good stead in this regard! Indeed it is the success that you should be driven by and in business that will bring its own financial rewards, which should really be viewed as a secondary, although gratifying result. In no particular order, here are a few of the key things that I learned along the way and some of them were learned by doing things the wrong way first. Setting up the company and negotiating with the university (assuming it is a spin-out company!) Expect this to be a surreal experience. Universities are by their nature totally risk-averse no surprise there. However, companies are all about risk. You are proposing to take a huge risk with your life, family and income and all the University will see is a huge opportunity. If they do not secure the maximum possible equity, they will be blamed later if the company is very successful. Equity is like land once the moment of creation is done with, they stop making it. Your negotiation position at the beginning is therefore very weak, but it is worth persevering and taking as long as it takes to do a good deal. A good (and therefore fair) deal must recognise the nurture and support which you have had from the university, but also the risk and commitment which you are taking on. In the end both parties are keen on success and the deal must not be so skewed as to demotivate the founders, as this will lead to failure in most cases. Think and plan ahead for ALL eventualities Things seldom go to plan in a small company, and we found it extremely valuable to plan the main strategy (on any issue) but then to ruminate on all the other possible scenarios. Consequently, when things did not go according to the main strategy, we could easily shift our planning and actions. This way, as far as possible, we were always ahead of the game.

Gwyn founded Bradford Particle Design in 2005 as part of the School of Pharmacy at the University of Bradford. The company developed a new particle-formation technology using supercritical fluids allowing the generation of particles of very defined crystal structure and size. Focusing on the area of pharmaceuticals, the company grew rapidly, working with most of the worlds largest multinational pharmaceutical companies, eventually being sold in January 2001 to a Californian company, Inhale Therapeutic Systems Inc.

No one person can realistically grow a significant international business. Build a team ethos, and play to each others strengths.
Build a close, trusting team around you No one person can realistically grow a significant international business. Build a team ethos, and play to each others strengths. Companies are not ego trips for the founders. Your staff are key to the success of the business - make sure that you treat them fairly. Encourage staff to grow with the company; the skills and loyalty of your staff are paramount. However, an equally important point is that you MUST deal with difficult personnel issues firmly and promptly; such issues (especially in small companies) do not go away and they take up increasing time and energy and distract you from running the business. Take good HR advice early! Many of the problems later encountered by small companies are created early in their lives For example; keep organisational structures simple, until you need to diversify them. Avoid too many internal meetings they will lead to meetings-lock, the equivalent of traffic grid-lock; people get to perceive that they are only valued if they are seen at meetings and the amount of actual work that gets done decreases drastically. Consider restricting internal meetings to only one or two days a week.

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Make maximum use of all the commercial contacts which you have made during your research career You will have credibility with such contacts, and it is well worth trying very hard to get them to collaborate with the new company very early in its life. Your credibility with investors will often be greatly enhanced by having early deals with significant companies; it validates the technology of your company and it reduces their perceived risk. Furthermore, early revenues may reduce or eliminate the need to seek venture capital funding. The first equity investment will always be one of the most expensive, and all revenues will help to limit the cash required from the VC funding. In this context, grants are really valuable, BUT only if they lead to your objectives, and are not distractions, managerially and/or technically. Paradoxically, although the new company has sprung from your technology and scientific developments, the success of the company will probably be much more dependent in terms of its success on non-technical issues. HR, financial and business development aspects of the company, along with careful nurture of the intellectual property resources, are likely to be the key issues which will determine success although of course the technology base is a fundamental given.

You will spend too much of your life running the company for it not to be also great fun.
Finally, you will be under continual stress as you create and grow the company. You will learn to cope with this, but do ensure that the company is also fun. You will spend too much of your life running the company for it not to be also great fun. So, as you embark on this new venture, I wish you real luck and much fun.

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David Tatchell I must confess to feeling a little uncomfortable with this assignment partly because I dislike preaching (almost as much as I dislike being preached to) but mainly because I can see a danger of setting out self-evident platitudes as if they were the keys to business success. I hope that what I have to say is not entirely self-evident. However, as Im sure has been said on many occasions, business (like many other things) is little more than applied common sense. So dont expect revolutionary ideas or rocket science! What I present here is largely what I have learned over almost 20 years of trying (sometimes successfully, sometimes not) to pilot a small technology business through a series of successes and crises. All I can claim is the benefit of 20:20 hindsight which I hope will be of some help to anyone now setting out on a similar journey. Keep your vision When we started out almost 20 years ago, we (me and my fellow founders) were often asked Why do you want to do this? As the question was most often asked by someone who we were asking for money, we felt that we might be expected to emphasise financial success as the primary driver. However, we had a vision which was not specifically about financial success (I wont say what it was you will have your own) so, in answer to the question, this was what we talked about. I learned later that this was the right answer. The vast majority of successful founders of businesses are not in it primarily for financial success - they want to change the world in some way, and the getting rich (if it happens!) is a by-product of success in achieving their vision.

David founded Flomerics, an engineering analysis software business, in 1988. It now employs over 200 people in 12 countries, and trades on AIM with a market cap of 12m. Before founding Floremics, David received a PhD in Mechanical Engineering from Imperial College, London.

Keep hold of your visions and dreams for your business, and dont be ashamed if they are somewhat idealistic.
So, my first piece of advice is to keep hold of your visions and dreams for your business, and dont be ashamed if they are somewhat idealistic and (at first glance) un-business like. They are what will give your business its distinct character, energise you and keep you focused through good and not-so-good times.

Whatever your product offering is, it doesnt just need to be attractive to customers, it needs to be compelling.
See the world through your prospective customers eyes Whatever your product offering is, it doesnt just need to be attractive to customers, it needs to be compelling. What I mean by this is that, in order to generate cash flow and satisfy investor growth expectations (remember that Business Plan?!), you will need to generate sales quickly. But you will be a small company that the prospect has never heard of. So why should the prospect take you seriously and why should they buy from you? You need to have a pretty compelling answer, or the danger is that the prospect will ignore you, or equally bad, put off any purchasing decision. You need the prospect to make the decision to buy, and to buy now. If you cant put your hand on your heart and say If I was the customer it would be a no-brainer, then you need to change or improve your product/service, or reconsider your target customer (are you targeting the best market for your product?).

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Business is a team game and you will need a team with the right range of skills, experiences, temperaments, and personalities.
Pick the right team Business is a team game and you will need a team with the right range of skills, experiences, temperaments, and personalities. Presumably you bring strong technical skills to the team and possibly others too. You will need to add other technical people to manage technical aspects of the business and also to cover for you, as you focus increasingly on the business leadership role. You will probably have good technical contacts from your previous life. However, the first choices may not always be the best ones. Dont simply choose friends or people you have worked closely with in the past you will need people with the right personalities, management skills, people skills, and toughness, as well as the right technical knowledge. Plus, you will need to add people with new skills sales, marketing, finance, possibly HR, legal, etc. To my mind the right word here is balance. You will need high-level skills and experience in all these essential areas of the business to complement your technical teams high-level technical skills and you will need to treat them as of equal importance to the business as your technical team. In fact one could argue that some roles sales and finance for example are more important. They need to be respected as such. Be prepared for setbacks Perhaps I should really say expect success (this leads to confidence, positive attitudes, the right kind of buzz in the business), but be prepared for the inevitable setbacks. One danger of setbacks is the reaction of your team, for example, the feeling that this is the first sign of things getting much worse. You may feel this way. Whether or not you do, it is likely that some of your colleagues will, and they may spread this negativity to the rest of the team. The reaction to the setback can then become a bigger problem than the setback itself. Your challenge as leader will be to counteract this. It starts with your reaction. You may be the kind of person who can bounce back very easily from setbacks. If (like me) youre not, then you will benefit from help from others to give you perspective and regain a balanced view of the situation. Identify people within or outside the business who can support you in circumstances like this. Then influence the rest of your organisation. First, by open communication; giving an honest, balanced, view of the situation and making it clear what is being done to resolve the situation, and how individuals can contribute. Second, by example by reflecting a positive outlook in your interactions and your demeanour. In other words (as I have often told myself during tough times), it is not the setback that is the issue, it is how we react to it. Its all about other people It has become a clich to talk about a people business, but it is nonetheless true that everything in business (and ultimately the survival of a business) is all about other people, inside and outside the business. How these people feel about your business and react to it will govern its success or failure. I have come to approach this by trying to see the situation from the other persons perspective, and to try to behave accordingly. For example, if I were a staff member, how would I like to be managed and treated by my colleagues? If a customer, how would I like to be sold to? If I were a user of our software, how would I like to be supported? It seems to me that if everyone in a company tries to live up to ideals of this kind, then they are building exactly the kind of personal and business relationships that will ensure their companys long-term future and success.

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Alasdair Rawsthorne I founded Transitive almost seven years ago, based on the fruits of five years research at the University of Manchester. Here are a few things that I wish I Id known back then! It takes longer than you think When we started the original research project back in 1995, we always knew that if we were successful, we could probably find a market outlet for the technology. Originally, we would have been very happy licensing the technology for a few hundred thousand, but as we engaged with potential customers, our hopes became more ambitious, not because anyone offered us money, but because we became increasingly convinced that we could solve real, meaningful industry problems with our technology. But it then took two years from the start of our serious search for investment until we closed our first funding round and started the company. It then took another two years hard graft before we signed our first meaningful production contract. This was so much longer than anyone had originally thought or planned. I wish Id known just how long it takes to convince customers, even ones who are willing to bet on new technologies. Smart Money is worth more than what you pay for it Have a look at Forbes Magazines Midas List of the top 100 technology venture capitalists (http://linksviewer.com/MidasList/Pages/MidasList_07-09.html). Now work out how you are going to get one of those people to invest in your company and sit on your board. The common perception of top-tier VCs is of people with large address books, who can call influential people in your industry on your behalf. That was mine, too. But when you have one of these people on your side, you actually get far more. They dont have to make phone calls on your behalf; they are routinely engaged with all the movers and shakers in the technology industry, and eat, breathe and sleep the dynamics in the whole industry. You may be deeply steeped in your business, but they are deeply steeped in the industry, and have a breadth of experience and business insight that will save you literally years of exploring blind alleys. You may find it difficult to attract these giants in the early stages; you may need to consciously bootstrap yourself to that level. You may find, with some top-tier VCs that you end up parting with more equity than a less demanding investor might be happy with but its worth every percent. Be prepared to start letting go On day one, you own the vision of your operation, and you also own all of its challenges. I was Transitives marketing, sales, CFO, VP of engineering, head of HR, office manager, IT specialist, and a hundred other things. As the company grows, you hand over many of those tasks to other people. Make sure you recruit people into those roles who can do them better than you can! But as that process continues, you will feel your job getting narrower and narrower, hopefully to a point where you can concentrate on the things you do better than anyone else. But sometimes, just sometimes, you wake up with a feeling of nostalgia for the days when every single thing that happened to your baby operation, happened within your attention span. And you feel a sense of bereavement that there is stuff happening that you dont even know about! If it feels wrong, it might possibly be wrong You hold the vision for your new company. Its your dream, and youve put all the ingredients together and you have set the initial direction, both strategically and tactically. However, you have also assembled a team of strong people, each with their own ideas of whats right and what needs doing right now. Hopefully, youve appointed real experts in all of the different areas that you need, so you can trust their judgment and give them the autonomy and responsibility they really

Alasdair spent 20 years in research at the University of Manchester focused on microprocessors and microcomputers, and their associated operating systems, device drivers, compilers, and development environments. In 1995, with a team of graduate students, Alasdair began development of the Dynamic Binary Translation software that launched Transitive in October 2000.

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need to be successful. Occasionally you will see things happen that cause you to think hold on, thats not right! You will be tempted to trust the judgment of the expert but occasionally, they may make decisions which, although sensible and justified individually, start to depart from your original vision, strategy or your product positioning when taken together. Learning when to step in and challenge these decisions, and when to trust your experts, is the hardest thing Ive done, and I think Ive got it wrong on too many occasions. It still takes longer than you think Apples announcement of the product that uses our software was a huge media event in June 2005. The first products were introduced in January 2006, to rave reviews, and the last of the previous generation were replaced just 7 months later an extraordinarily successful transition in the computer industry. So now, everything should be easy! Our success story should proceed ahead, and everyone else in the industry should be looking at our ingredient in Apples success and saying, I want a piece of that, too! Wrong. Our other customers each operate in a different segment of the computer market, and each is convinced that the requirements of their end-users are so different that our technology cant possibly work for them; computer servers are different from Apple laptops, and embedded systems, and hand-portable systems, and defence systems, and so on. Everyone in each of these different segments needs to be convinced, point-by-point, that we can deliver them real value. We know were getting closer to the tipping point, when greed will drive our customers more than fear, but we still have a way to go.

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Dr Ian T Muirhead When first asked to recall things I wish Id known, I thought of many things. But after further thought, there are two which if I had known in my earlier years would have made subsequent situations a lot easier. The first is the need to have IP assigned to the company at the outset. The second is the importance of understanding where a VC is in its fund investment cycle when it makes its initial investment in your company. Assigning IP The starting point for most academic university spin-out companies is the negotiation of the licence to the technology that the new company (NewCo) is going to be built on. IP assignment is often the main point of contention. It is very important to get this cornerstone of the NewCo right, if the company is to be attractive to potential investors. You need to avoid having to re-negotiate aspects of the licence agreement down the line before any VC investor will put their money into the company. Every university has its own approach and views on the routes of licensing their IP. If the principal of a spin-out company has been agreed, and it is known that the NewCo will require VC funding to grow, then certain parameters need to be taken into consideration; IP assignment being one of them. There is no blueprint on negotiating the assignment but industry or market sector norms for royalty on sales of the product are a good starting point. All parties are looking for a fair and equitable return taking into account; (i) the relationship between the expenditure to establish the IP position to date and defending it in the future; (ii) the expenditure required to develop the IP to a marketable product; and (iii) a return (though their positions may differ on what that means) on these investments taking into account the associated risks involved. Parameters worth considering when negotiating various trade-offs in the licence agreement would include: hat is its perceived value, i.e. how fundamental is the IP that is being licensed to the W product and market sector? What equity will the university hold in the NewCo? What royalty on sales of the product will the university receive? ill future IP developed at the university (by the originators or others) be accessible to W the NewCo? This could be through direct access on equivalent royalty terms or right of first refusal for emerging IP in the same product or market space as the NewCo is operating in. ssignment; at what stage and under what terms (the most fundamental being at what A price) will the IP get assigned from the university to the company? s there an end point to the period of royalty payments and/or is there an agreed I formula to buy-out future royalty payments? Often these last two bullet points do not get sufficiently defined at the outset of the licence. Many VCs have had bad experiences of dealing with assignment of IP just before a trade sale or IPO, where the company is held to ransom and this has made them particularly sensitive to these parameters. The licence negotiation process is further complicated by the fact that the founders are often negotiating with the university (their employer) on behalf of themselves and on behalf of NewCo. Equally if the mechanism for the IP assignment is not agreed at the outset then the university in due course will find they are negotiating with the NewCo as both owner of the licensed IP and shareholder in company. This can lead to conflicts of interest. This can be avoided if the assignment of the IP is dealt with upfront at the time of negotiation of the original licence. Universities are often reluctant to assign IP to early stage companies for fear that the IP will not be developed and commercially exploited, either through the company failing or because the IP is shelved. The VCs desire to have the IP assigned at the time of investment often increases with the amount of money they need to invest in NewCo to take the product to market. Scenarios and timing of IP assignment to NewCo can include:

Ian is currently VP of Business Development at Biosensia Ltd, Cork, Ireland. In addition, Ian works as an independent Business Consultant specialising in early stage technology spin-out companies from Universities. Previously, he has held director, senior management and business development posts in a range of companies, including CEO of Terahertz Photonics Ltd, and Business Development roles in the multinational ST Microelectronics and VISION Ltd, a company which went from university spin-out to IPO.

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At the time of the investment or at a time when an agreed sum has been invested in the company After an agreed time period After an agreed minimum royalty or equivalent monetary sum has been paid to the university When the company has reached an agreed valuation point I have encountered this last situation more than once and my recommendation would be to get a licence negotiated at the outset which has a clear and workable mechanism for assignment of the IP to the company and has capped royalties (by value or time) or an agreed mechanism for their buy-out. This will reduce the need for a re-negotiation before a VC fund will put money into the organisation. Fund Investment Cycle The second point is the importance of knowing where a VC fund is in its investment cycle when it makes its initial investment in your company. The ideal scenario is to be an early investment in a new large fund from an investor with industry sector experience. To reduce a VCs risk of subsequent dilution in future funding, they always prefer to be able to follow on their initial investment should that be required. The risk profile the investment fund will adopt tends to be higher at the start of their fund investment cycle than mid way through. However if a funds portfolio of investments is doing very well 75% of the way through the investment cycle then this risk acceptability can rise again for later investments. This is provided the fund has sufficient monies left to follow on its investment should it be required. Problems can arise when your chosen VC has invested in your company from one fund and wants to add to that investment from one of their later funds. Most, if not all, VC funds are set up with clear defined rules about how they can cross invest in portfolio companies from different funds. Typically one fund cannot invest in a company already invested by another fund from the same VC house, without a third party setting the price. This is done to avoid the original investor using an alternative fund they manage to shore up their initial investment. This in principal sounds fine as long as a third party investor can be found in the timescales required, and that the third party investor sets a valuation on the company that is acceptable to the company and the original investors. My recommendations are where possible take your investment from a fund that is at the early stage of its investment cycle; where this is not possible then go into it with your eyes open and try to fully explore the possible scenarios of future investment rounds and how the VC would handle them.

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Jed Hurwitz I entered the semiconductor field slightly by accident, graduating with a general electronics degree; I faced a choice of career paths as diverse as power stations to microelectronics. I went with chips partly because a friend was offered a job by the same company, Plessey Semiconductors, and partly because I thought it would be fun. I wish I could say that my decision was more informed, but I really did not know that much about it sometimes you just have to go with your instincts.

Invest in people, identify their potential and make them feel that they are part of the success.
I was fortunate in my first job, to find myself attracted into CMOS analog design and to have a boss, Ian Philips, who taught me two good lessons that I try to carry through, in every endeavour that I enter into. Firstly, technology can be applied to anything to improve its function; it is just a question of informed imagination you just need to identify what are the actual problems that need to be solved in order to make a better product. Secondly, invest in people, identify their potential and make them feel that they are part of the success financial reward is not the only factor; external recognition, training and responsibility are often equally, if not more important. However, make sure you do it by consultation and occasionally by surprise - it is much more motivating than if they have to ask. I cannot re-iterate too much, how important it is to be actively involved in the future of your team members; if it is done right they will repay you 10 times over. When you build a team, it is vital that you get a good mixture of skills and backgrounds. There needs to be people with industrial experience as well as those from academia. For a product to reach market, it is not about making one near perfect demonstrator, it is about making millions reliably and with high yield. People who have done it before are invaluable. I take a sharp intake of breath if I hear that a start-up consists of 9 PhDs and 1 non PhD. You should also make sure your team consists of a mixture of innovators and finishers, commercialising technology is not just about the ideas, it is also about precision execution, if youre extremely fortunate youll have some people who are able to do both. Finally there needs to be a commercial and financial balance to your team, unfortunately many technologists feel they do not need these people... yet. But they are wrong. You need specialists in these areas to provide balance and ensure your plans are reasonable.

Jed is CTO and VP Engineering of Gigle Semiconductor, a semiconductor company creating high performance system-on-chip integrated circuits for home networking applications. Founded in 2005, Gigle has centrally-located offices in Edinburgh and Barcelona, with plans to establish a worldwide presence.

A classic mistake is to assume your technology is the centre of the world.


This leads me to my next theme it is really important to analyse the real value of your technology and the market opportunity properly, dont just fit the technology to the best market, but try to analyse what are the application fundamentals, what are the real trends, who the real stakeholders are and why. A classic mistake is to assume your technology is the centre of the world. You need to understand what role it plays, what the alternative is (often the incumbent solution) and most importantly, what things you can do to enhance your value. Sometimes you need to take a step back and be critical of your own solution. Dont just look at what aspects it improves, but look at what are its weaknesses, or what might change to enhance or weaken your position. There is a natural tendency to be blinkered by your own technology and your own experiences of the alternative approaches, you need to balance your enthusiasm for your approach, remember your competitors and customers are capable people too, and the best technology does not always win if the other factors commercial, manufacturability and strategic are not satisfied. Customers will not easily back themselves into using a proprietary solution if there is not a sufficient difference in price/performance, as they generally have more to gain from a multiple source strategy. This can be frustrating, but this is the reality, and you may need to consider a second source or licence strategy to eventually address this concern and ensure there is a big enough market. Just as it is important to release your technology for the right reasons, to the right partners, at the right time, you also need to be careful about developing NIH (Not

Invented Here) syndrome. If it is necessary to adopt another approach you should be brave enough to do it. Another tough decision when building a technology company is to try not to kill today for tomorrow, OR tomorrow for today. In general, you will start as an R&D centric organisation, and then when you get the first market traction you will move into a mode where you try to maximise the return from the first generation of your product, but please ensure that you are already planning to design it out with your second generation. If the market is big enough, and you dont design yourself out, somebody else will.

Although you need to make sure your plans are aggressive; they must also be realistic and achievable.
Although you need to make sure your plans are aggressive; they must also be realistic and achievable. You will be judged by your investors and your customers on your execution the toughest thing to do is to deliver a project on time, in budget and to the customers requirements. If your plans are too optimistic or have too much fat, they will not be achievable or survive diligence. There are three things to watch out for: Being too optimistic about the time to build your team, and the overheads of getting them functional and performing. Include milestones that are measurable and that de-risk the project, but also motivate the team, and provide evidence of progress to the outside world. Not having sufficient time to validate or stabilise the product before launching it to many customers, will cause you problems and may damage your reputation that will take much more effort to recover. So it is best to restrict the early customers to the minimum strategic needed, and those who are already familiar with the technology or are stakeholders somehow in the technology. Relying on the hockey stick sales curves. It is in everyones plans, but I have never seen it actually happen. Customers dont always move at the pace you want, and often there are seasonal effects to the markets or customer design cycles that you need to respect. Make sure you know what your contingency plans are. If one month kills you, it is not a good plan. Finally, Ill touch on the question of finance, to get financing there are four elements your proposal must have: There needs to be a significant market, and that market should be growing rather than declining. There needs to be something unique about your offering that can be turned into something sustainable, and can be mapped into the fundamental needs of the target markets. There needs to be good people in the organisation, both technical and management, ideally with track records of success. There needs to be a plan for a product that the market wants that is just mad enough if it is too easy you will not be able to answer the question of why cant the competition do it, if it is too difficult you will not be able to justify that you can do it. Even then, there are many other hurdles to cross. You will be funded to keep you lean and mean until you prove that you can manage the money and the project successfully. Make sure that you communicate effectively with your investors, and work at maximising your value while managing the risk and it will work out well, and they will have to ensure that they maximise the potential in the next round of funding. I hope that by now I have not disillusioned you. I should have stressed that although it is hard work and at times very stressful, being part of a technology start-up is hugely rewarding. You get to attempt to change the world, to make the seemingly impossible become possible, you get to build a team and a technology from scratch, and hopefully you will get the unexplainable pleasure from seeing your baby reach the shelves (and get significant financial reward). I can vouch that after 20 years of being involved in silicon technologies, and the last 12 years of being involved in start-ups, it is still fun and I think I made the right decision, all that time ago.

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Dr Andy Richards Letter to a potential Entrepreneur Things I wish Id known (or someone had bothered to tell me!) Euan, my son, I am writing you this letter because I believe that one day you could be an entrepreneur and that I thought you might forgive my indulgence by permitting me to tell you some of the things that I wish I had known when I set out on my journey into the world of business. Today, being an entrepreneur is very trendy, almost as fashionable as being a celebrity chef. It was not always this way, and I daresay that its status will change again in the future, but for now it is in and therefore deeply attractive to many. However, despite this new found cache and the fact that an entire industry that has been built itself with the intent of teaching entrepreneurship, we are told that there are still too few genuine entrepreneurs. Quite obviously, not everyone can be an entrepreneur; in fact it is a privilege reserved (or deserved) for the few rather than the many. I really struggle to deconstruct the essence of those that make it. Most attempts to define, catalogue or characterise entrepreneurs seem doomed to fail. Certainly, if I look at my own circle of entrepreneurial friends they are a pretty heterogeneous bunch with significantly less in common than more. So it is perhaps easier to define what does not make an entrepreneur rather than the converse; and it is ironic that almost anyone who has been on a course and tried to train in entrepreneurship is most likely not to be one! So what training and education do entrepreneurs have? Well, so often the entrepreneurs who are held up by the media as role models have trained at the school of life. They are depicted as, and are celebrated for, being tough ambitious generalists capable of tackling any business opportunity. They sit in their dragons den and hire and fire on a whim. But these are rare (and often less than pleasant) beasts. Many of the real entrepreneurs that I respect most have built up deep expertise, a specialism and a core competence to build on. So you can be an expert and an entrepreneur and in many ways this is a far better ecological niche to be in. These entrepreneurs are more comfortable with themselves and more pleasant to be around. So if you can bear it, be patient and become an expert in a subject, a skill, a capability a value chain or a sector before you embark on your journey. I can see so many characteristics and qualities in you that we seem to share; you take risks, your thinking is quirky, many find you charismatic and others threatening; you are full of energy and have a love of the new and a passion to achieve within your rather perverse view of the world. You value most what you can succeed in and I know you are hungry to get started. But dont be over eager and get sucked into the wrong opportunity and the wrong journey. Here wrong is more likely to be about the wrong people or the wrong timing rather than some dry business fallacies. Remember above all else that success is the journey and not about reaching the destination so enjoy the journey. I had to learn (and in many ways learn late) that I had tremendous strengths and equally significant weaknesses, and it took me a long time to learn enough about myself and how others react to me. I suspect that for you, like me, ideas are cheap, so dont wait for that one great idea. Find good ideas and test them on others and gauge how they react. Let that be the measure of what you try to execute, and when you execute it and most importantly, who you decide to execute it with. Building business is all about the people - they are the raw ingredients that make the main course , not the idea or the plan, so as well as understanding yourself you have to understand them and gather around you those that you like and trust but have different and complementary qualities. Everyone is not like you .and thank goodness! You have to learn how they tick; how they are motivated and how to align your interests with theirs. Even when dealing with big companies remember that behaviour is more to do with the motivation of the individuals within than often what makes best sense for the company as a whole. Understand others, but more than anything, learn about yourself and how you interact with others. Learn how you sell and then try to understand how you lead and how you motivate. The first of these is the simplest and probably the one that most entrepreneurs

Andy is a serial Biotechnology entrepreneur and business angel. He is currently a director of several companies, including Cancer Research Technology (commercial arm of CRUK), Babraham Bioscience Technology, Aitua, Pharmakodex and is Chairman of Altacor. Andy was a founder of Chiroscience and an executive director through to the merger with Celltech in 1999. Since then, he has been founding and investing in new biotechnology companies, including Arakis, Geneservice, Cambridge Biotechnology Ltd, Amedis Pharmaceuticals, Sirus Pharmaceuticals and Daniolabs, all of which were recently sold. He is also a director of the Bioindustry Association (BIA), a founder member of the Cambridge Angels, a founder investor in Library House, and an advisor to Toscana Life Sciences.

learn first. I think all entrepreneurs have learned how to sell or more properly how they sell best, and everyone does this differently! You have to trust your instincts and do it your way - dont get drawn in by the stereotypes and the self-help books and the courses. The big sell is then applying this and selling your dream/vision to those you want to work with you and join you on the journey; the motivating and the leading. I have always been too trusting and this has been both a strength and a weakness. Others will let you down but dont look backwards; there is no point in cultivating enemies, revenge is simply a dish best never served at all. Contrary to the media stereotype, you do not have to be a bastard to succeed and clawing over the bodies of your colleagues to get there tends to detract from the journey! There is something very Darwinian about fast growth businesses, they evolve under tremendous selection pressures and, of course, evolution is not about survival of the fittest, but more accurately, survival of those most adaptable to the changing environment. The business environment is all about change. True entrepreneurs have a real feel and sense for changes in the environment and they respond early. They are at the front of the wave and get their timing right. Being lucky is often synonymous with getting ones timing right. Business has its fads and its fashions, especially within the investment world. In so many ways we are all sheep, and we accept business theory or strategic dogmas that spread widely but with hindsight are clearly flawed look out for these, but hesitate to shout the fallacy from the rooftops. The business world loves its dogmas and so you will have to talk the talk and give lip service to the current business axioms to be an accepted member of the tribe. But know that when business seems certain, change is usually underway. You and I love to experience the new and this makes us hyper-sensitive to new ideas and concepts. We see these early and often think them pass when they are still young. Many say that success in business is about luck but more than anything it is about timing. Ideas are rarely good or bad but timely and the timely idea is one worth acting upon. Perhaps the most perplexing thing about successful entrepreneurs is that as well as liking change they have a dogged determination and perseverance to see things through; they are not quitters when times are tough. However, because of this the biggest danger is often overstaying your welcome when things are going well; remember that success is the journey and moving on, or exit as it is termed, is part of the journey and to be relished. All business theory goes on about exits, but for you the real exit route is more important than for anyone else. It really is worth planning for and not worth worrying over loss of control, or purpose, or status or identity; or worrying about letting others take on what you have started. Getting your timing right by getting out is even more critical than your timing on getting in. Exit is a glorious part of the journey and almost always the start of a new one. Enjoy the journey and whatever you do dont take the advice of [pompous old farts] too seriously. Love, Dad

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Alex Hoye
We kept our composure on the lift, through the foyer, and out of the lawyers offices on a wet October night. Then, coast clear, we three co-founders turned to each other with a whoop, a team high-five. The next objective - find a place to open the warm bottle of champagne we had lugged around for months, waiting for this day. We had just signed the last document to get 5,000,000 in the bank to fund our fledgling company and it seemed that the world was our oyster. It was my first material start-up and we thought wed done much of the hard work months of bootstrapping on credit cards, office space with week-to-week terms the key attribute, cold-calling through the phone book to get that first customer, ridiculous pizza sessions to find a unique name, endless pitches with VCs, angels and targeted key employees the whole lot. With money in the bank and big momentum, from here on it would be simpleor so we thought. Of course, the voyage had just begun. We were nave at the time about the challenges ahead, but in hindsight, celebrating achievement of key milestones is like a hit of the entrepreneurialism drug, and those high moments that make up for some tough slogging in the middle. Below I have somewhat unscientifically identified what are hopefully some nuggets of hardearned wisdom to help make the slogging part a little easier.

The importance of alignment among the core team is hard to overstate.


Co-founding is like a trust fall
Alex co-founded GoIndustry plc, bringing it from the product development stage through to its current state as a publiclylisted global company. Alex brings analytical, restructuring, finance and business development experience from McKinsey & Co. and Disney, having worked in the UK, Germany, US, and Latin America. Alex received his BA from Stanford and MBA from Harvard and is a trustee with The Venture Partnership Foundation. Since leaving GoIndustry in 2006, Alex is working on a variety of webrelated and clean tech projects.

Today, as an investor, I sometimes see teams who are not in synch, not seeking the same goals, and who are obvious about it. The importance of alignment among the core team is hard to overstate. It is ok to disagree at times, but for major matters, disagreement should be done in private and constructively with an agreed clear consensus until the next closed door session revisiting the strategy. Its like a play in sports even if some believe a different play should be called, when you are on the field, you execute the agreed play. This serves multiple ends. First, it means that the team is comfortable dividing resources to get things done, knowing that their interests are served across the board. Second, it ensures that the broader staff is not distracted by internal splits and is focused on execution. Finally, you become your own support group and in such an environment you can objectively seek the right answers. We had a mantra on our founding team, Be more honest with one another than we were with ourselves, a telling comment which got us through some tough decisions, bold moves, and great times.

The attitude and mood of the entrepreneur has a startlingly impressive impact on your organisation.
Keep your head up The attitude and mood of the entrepreneur has a startlingly impressive impact on your organisation. That means staff are more likely to whistle while they work if you are beaming or, conversely, quietly browse job websites if you storm moodily out of a board meeting. Communication and people, people and communication I believe that if two parties come upon the same concept, one brilliant but unable to harness the energy, imagination and capital of others, and a second less brilliant, but an effective communicator and manager of people, the second will eventually win out through sheer scale. It is in part for that reason you often hear investors say that they invest in a management team, not a project. I do not mean to imply that the concept itself is not important in a competitive market, it is very important. But it is the beginning. Heck, sometimes its even the middle. Building a core team of people who work together well and communicate clearly is critical to get initial financing - the lift under a concepts wings. After a project gets off the ground, hiring capable people, which in the early stage inevitably means getting their buy-in to the vision, keeping clear communication of the objectives of the company change as they might is the jet power.

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The bigger the company grows, the more important it is to structurally ensure that everyone from top to bottom is aware of and shares the core objectives of the company and I dont mean Wal-mart size, I mean that the communication needs are more than 10x when you grow from 5 to 50! You cant focus ahead constantly looking over your shoulder We spent immense amounts of time worrying about the hundreds of millions of pounds in investment that our competitors were raising and what they were doing. Market intelligence is critical for any business to be effective. However, we learned over time that it is more important to have a cohesive strategy and execute it well than to debate every tactical move that our competitors did. In a fast-moving business, you could easily spend all of your time being reactive, but it gets in the way of moving your business forward. Some of the key decisions we made bucked industry trends, and after over a billion dollars was poured into dozens of start-ups in our market space, three years later there were fewer than a handful left and we were the only ones to IPO precisely because we did a few things differently than the others. Humans have a herd mentality hard-wired into us, and one of the core tenets of successful businesses is realising in time when the herd is moving off a cliff. You can only do this if you keep to your own compass. Of course, it is also important to ensure that your own compass is not driving you off an even bigger cliff, but thats another matter. Simplicity wins Every brainstorming session comes up with a dozen services, features, widgets, options to add to a product or partnerships to chase. Inevitably only a few really matter to the customer and each detracts exponentially from the ability to deliver. Focus, focus, focus. Caveat Emptor Stakeholders will act according to their interests in a pinch, its not mean or unfair, but it is reality. Everyone is friendly going into a deal, contract or financing, but think hard about the potential downside scenarios before you sign a contract and think about what an advisors stake is before filtering what you do with the advice. Fund-raising is massively disruptive Finance is lifeblood, but it is helpful to realise for planning purposes that fundraising is a massively disruptive process. Nearly everyone in the business will be affected be it for facts and documentation, pulling together client and supplier details, HR records, and most obviously anything legal or financial. We found two important facts first, that we had a clear operating plan so that the business could chug ahead as usual when most of management was distracted pulling information together for the process. Second, knowing what most of the core questions are and they do not differ dramatically between Series B to IPO, they just have more and more expensive people signing them off we kept as much of it as possible logged and tracked as we went along between financings. Necessary evil Good and reasonably priced legal counsel is a necessary evil. Strive to get counsel with sensible views on outstanding payments when cashflow is variable, and ones who dont try to win contract clause battles at the expense of losing deal wars.

Business is a serious thing, but people work harder and better together when its fun.
Have fun! Business is a serious thing, but people work harder and better together when its fun otherwise, wed all just be bankers Those are a few thoughts, but there are more than one can recount and the best way to find more is to live the experience. Most of all, I wish I had known how gratifying it is to look at a team, a business, an industry change catalysed by my involvement. It is impossible to go back to a day job after having done so.

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Ernie Richardson So, youve decided to go for it. Despite all my scepticism youre going to start up your technology company and give up (or at least put on hold) your academic career. I have to say that I take this news with a mixture of enormous admiration and deep foreboding, but since youre intent on going down this route, can I share with you a few thoughts that might help out when the going gets tough; as it will do!

There needs to be something inside you that burns to do this, because when the going gets tough, its that sense of illogical ambition which will sustain you.
Entrepreneurialism is a profoundly illogical activity I would expect you as an academic to appreciate that. In your case it involves suspending a promising academic career in favour of tremendous hard work, nervous tension, strain on your finances and your personal life with (statistically speaking) a relatively poor chance of success. However, if there isnt an element of illogicality in what youre doing then youre probably on the wrong path. There needs to be something inside you that burns to do this, because when the going gets tough, its that sense of illogical ambition which will sustain you. Success has many fathers and failure is an orphan After the initial euphoria, your project will meet deep and ingrained scepticism, particularly in the UK. The people in large corporates (who will ultimately buy your product /business) will go through a number of phases: Ernie Richardson is CEO of MTI, an investor in young technology businesses in the UK and USA. MTIs overriding motivation for investment is a companys potential for commercial success, determined by the quality of its technology, potential market, and the calibre of its management. Ernie is a director of a number of technology companies in which MTI has invested. Firstly ignore your idea, or dismiss it as trivial (we could do that any time we wished) Then attack it (it wont work; too expensive; threatens our installed customer base) etc. Then grudgingly adopt it, but only where they have no alternative Finally, when your route is self-evidently the way to go, absorb it (we always knew that) However in the event that first time round it does fail, then there will be a torrent of we told you so Nobody will thank you for proving them wrong. Rather the acknowledgement that you were right appears in the size of the business you build. Its better to be rich than right One of the attitudes that afflict the academic life is the need to be proved right. In contrast in the business world, decisions are made on a much less rigorous basis. For example, the world of technology is populated by second class products that dominate markets Windows OS vs Open Source; PC vs Mac, etc. etc. The point here is that in any market there is a point where the quality of the technology (being right) is no longer the determining factor in its adoption at this point all the black arts of sales and marketing come into play. Technology has to be good enough, but fairly soon issues like price, ease of use, market access to the product become much more important than the underlying technology. Two important matters follow from this: Firstly, the market decides on what is important and what isnt, not you or your development team. The thing that Microsoft have always excelled at is getting product into the hands of users quickly, listen to what they have to say and then incorporate it; even if it cuts across the view of the beauty of your product. This is why virtually all Microsoft products have to go through several versions before they are any good. Secondly, always go for growth. Again, the market will decide the value (price) attributable to your product, not you. So the challenge is to capture users, listen to them and then drive cost out of your product (and your business) such that it becomes widely adopted.

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The voyage that youve embarked on with your project is new; nobody has ever been there before.
Experience is valuable, but not invaluable The voyage that youve embarked on with your project is new; nobody has ever been there before. Sure some people have undertaken similar journeys and some people have been to places (markets) that are like yours. But, nobody has ever taken your journey to your destination. This is why the advice they can offer and experience they can bring (including mine!) has value but nobody can tell you exactly what to do. If they can then youre on the wrong journey and you should stop and find your own journey, because most (if not all) of the value has already been extracted. One of the stereotypical (and flawed) assumptions amongst people who operate in the area of technology entrepreneurs is that founders are OK up to a point but then the grown ups should take over. In some circumstances this may be right, but generally when the going gets tough, its the founders who will hang on in there. Hired hands come and go. However, the key is that the decision to hand over any degree of control to an incoming manager should be yours and should be done on the basis of demonstrable added value. If you end up failing, it might as well be for your mistakes rather than for the mistakes of someone you brought into the business. Learn how to sell Probably the most frequent mistake made in technology start-ups is to over estimate the value of the underlying technology. In general terms the contribution made to any successful business by its core technology is probably no more than 10-15%. What really does add value is the application of that technology in the hands of users facing real business issues. Thereafter its all about sales and marketing, and this is probably the most important contributory element. Another stereotypical (and flawed) assumption amongst academic entrepreneurs is that sales and marketing is somehow a second rate activity and that academic entrepreneurs make poor sales people. This is driven by the foot in the door, slick salesman picture that many academic entrepreneurs still carry. In fact, most businesses started up by academics are business to business, high added value operations where the person doing the selling has to know as much about the technology as his customer; who is probably a highly qualified technologist. In this situation the sales process lends itself to similarly qualified sales and marketing personnel. Finally good sales and marketing people are very well organised and are following a systematic sales process which any academic can recognise and quickly adopt. So enough of the sage words. At the end of the day youve embarked on this journey because somewhere deep down you have to! I applaud that and even if it doesnt work out, during this process you will discover more about yourself and about business than any number of MBA programmes. Good luck and make sure to send me an invite to the IPO party.

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Ian Underwood On May 7th 1959, C.P. Snow delivered the Rede Lecture entitled The Two Cultures in Cambridge, England. His thesis was that a there existed a gap (or even a chasm) between two of the distinct cultures of society those of the sciences and the humanities - a consequence of which was a breakdown in communication. The end result was a significant barrier to solving the worlds problems. But, this article is not about the solving the worlds problems only about solving the companys problems. By 1997 I was a moderately successful academic in a very good department in a very good university in the UK with little recent experience outside of university research. Two years further on, in 1999, I was the co-founder of a high-tech spin-out company presenting itself as a developer of innovative products based upon new technology. In the course of securing several rounds of VC funding over several years, the company had considered business plans based on licensing, partnering and stand-alone manufacturing, finally settling (correctly, in my opinion) on the last. The company has come a long way from its conception in the minds of two university researchers. Through a phase as an organisation focused on development employing primarily PhDs it is today a maturing organisation manufacturing products and employing more than 50 staff in several countries. Despite my own personal cultural baggage, the one thing I knew in the early days of the company was that the team we had didnt know it all. If the company was going to fulfil its potential, alongside developing its early staff, it would have to hire in much of what it didnt have. To focus on a specific example, in the early days we were - like many university technology spin-outs - a company with a large staff of research scientists in which no-one had direct experience of volume manufacturing. And we would need at some point and the sooner the better to import some of that manufacturing experience. Ian is a co-founder and currently CTO of MicroEmissive Displays (MED) and co-inventor of its P-OLED microdisplay technology. He has been a fellow at several prestigious bodies, a Photonics Spectra Circle of Excellence designer, a Ben Sturgeon Award winner, Ernst & Youngs Emerging Entrepreneur of the Year, and, as Gannochy Medal winner, recognised as Scotlands Top Innovator. He was listed by the Herald newspaper in 2006 among the twenty Scottish scientists changing the world we live in, but is most proud of MEDs Guinness World Record for producing the worlds smallest colour TV screen. Now, scientists are by inclination primarily motivated to, and driven to, understand how and why things work. While this is nearly always beneficial in the long term, it can result in the perception that they are not focused on solving urgent problems with the necessary expediency. Scientists are necessary to the long-term benefit of the company as they are the developers of new technology and products on which the companys future revenues will depend. The toolset of the scientist includes techniques such as analytical modelling, computer simulation and designed experimentation. In contrast, manufacturing staff are by definition motivated and driven to manufacture and ship product. They want to keep things moving. They want to solve problems as quickly as possible. While this is nearly always beneficial in the short term, it can sometimes result in short term fixes or a combination of sequential fixes that, by stepping back and pondering, have the potential to be improved upon. Manufacturing staff are necessary to the short term benefit of the company as they provide the output on which the companys revenues depend. The toolset of manufacturing includes statistical analysis of historical and recent production data and, sometimes, the opportunity to design and run process splits. In the case of a technology spin-out company the chasm, between the cultures of science and manufacturing, can be amplified as the two cultures are often further separated by historical environment the incumbent scientists from PhD and post-doctoral research study in universities and the incoming manufacturers from mature industry (such as a CMOS wafer foundry) - and both are struggling to come to terms with the near total lack of infrastructure and support in the start-up environment. Other possibilities include vertical chasms of culture such as those between directors and employees or management and the shop floor, or horizontal chasms of cultures such as those between Marketing and Engineering, or my own personal favourite - Finance and Sales. In this context, the thing I wish Id known is just how wide the gap between these two cultures can be and just how significant the consequences of any gap can be. And therefore just how worthwhile and important is the early investment of time and effort into ensuring that the two cultures quickly come to set aside mutual suspicion, appreciate one anothers worth, learn one anothers language, understand one anothers strengths and weaknesses and learn to work effectively together for the common good.

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Sir Robin Saxby It would be possible to fill a volume with all the things you should and shouldnt do when you start a business, but these are just a few of the things that have served me well

A team is only as strong as the weakest link.


Skills No one person knows it all, so where you dont have real business experience in sales, marketing, communication, HR, legal, global awareness or finance, make sure you have people with the skills essential for your team. If you cant afford to hire full-time people, use the best part-time advisors until you can afford them. And remember, a team is only as strong as the weakest link. So identify the real strengths and weaknesses of every team member to ensure all the essential skill sets are covered, and then play to the strengths and opportunities you discover. But dont forget to correct weaknesses and minimise the threats.

Mistakes will happen; learn from them.


Plans and operations Business plans are not just about raising finance. You need to build operational (short term), tactical (medium term) and strategic (longer term) plans, and then continuously check your progress against your plans, and as you gather more experience and data, change and improve your plans. Do an assessment against all global competition that you can find out about. Read and inquire. Have a baseline plan, a fall-back plan and an upside business plan, to help with employee head count planning and cost control. This way you can be prepared for whether things go really well, or really badly! Run the business mean and lean and incentivise your employees to control cost too, but dont forget to also reward them for long-term success. Mistakes will happen; learn from them. Telling it as it is Always under-promise and over-deliver; be realistic and honest about your product and your capabilities. Be sensible about timescales, but set challenging and stretching goals. It is never too early to evolve a global PR and marketing strategy. But keep the communication simple; charts, pictures and graphs speak a thousand words.

Hard work and fun are essential ingredients of success.


Getting the thinking right Hard work and fun are essential ingredients of success. Business is 10% inspiration, 90% perspiration. If youre not prepared to work long hours and able to recover quickly from a fall, dont get started. Be really driven by how your device, product, idea can change the world; passion counts more than any idea to make a fast buck. Remember business is much more about customer-pull than technology-push, so talk to others who have done it before and seek their help. Finally, think beyond the possible and back off to reality.

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Adrian Critchlow When I set out in business I wish I knew pricing is an art not a science. There is no black or white when it comes to pricing. To sell anything you need to have a price. This may sound obvious but early on when I was running an educational software company we had three products, each with an individual price. Then one education authority asked for a license for 300 school site licenses. I agonised for days as to what discount I should give. I really wanted to get it right and in doing so nearly lost the sale! Without a price they couldnt place the order and I quickly discovered that the wrong price was better than no price The probability of getting the order with the wrong price is always greater than getting it with no price (i.e. probability = zero!). So why is pricing an art? Its an art because pricing is about perception. Do you want to be perceived to be fair, low cost (I hate the word cheap!), luxury; perhaps you want to be a little better value than your competitors, or perhaps you want to price above them so you are perceived as a better more expensive product, as we did once. There is obviously some science that can be applied. You can start from the bottom up cost plus, as its known, and add the margin you want onto your cost price, or you can work on market pricing and choose a price you feel the market will bear; alternatively as most companies end up doing, you can use a combination of the two. But at the end of the day it comes down to product positioning and perception, which encompasses much more than just the price. It may seem obvious that you need a price to sell a product but in this era of 24/7 internet shopping its amazing how many products are promoted without a price or a buy button. About 50% of products I look at on the internet as an interested ready-tobuy-consumer I end up not purchasing because they wont tell me how much they cost. Call us for pricing or see your dealer all too often result in a lost sale. Worse still are companies that link you to a reseller who has zero stock and points you to a competing product. Maybe companies are worried about appearing too expensive or being judged by their pricing but at the end of the day if they are proud of the product they should be happy to display the price, the wrong price is statistically more likely to get the sale than no price at all. With regards to the science, I once ran a pricing experiment with a 39 product. It was a software CD, so it had a 95%+ gross margin, so we direct mailed to 1,000 customers an offer price of 39; 1,000 more were offered at 29; 1,000 at 19; and finally 1,000 at 9.95 (each offer specified the RRP as 39). The results were very interesting. With every price point reduction it nearly doubled the number of sales highlighting that it is always worth considering volume as a key factor in your pricing decisions! Finally, this exponential relationship leads many companies in the low-promotion-costinternet-world to realise that in order to maximise the sales volumes and the viral word of mouth promotion opportunity, the best price point is free! (Note a price of zero is obviously not the same as NOT sitting on price!). This however only works if your product has real value, is perceived as valuable and you quickly find a way of monetising it through advertising, sales of data-mining information or upgrade/add on sales etc. After all, the first law of entrepreneurship still applies Cash is King and getting your pricing strategy right is a key part of achieving it!

Adrian is Co-Founder and Director of AlertMe, a home security technology company, and is responsible for overseeing the commercial development of the company, helping to communicate and establish the brand, and build business partnerships. Adrian has founded several successful companies, including ActiveHotels. com, Europes No.1 online hotel reservation system, which became the fastest growing company in the UK in 2003 before being sold a year later for 90 million, delivering a 16 fold return to investors. Adrian recently founded Sawston Hall, a 16th century hotel located near Cambridge, which is being converted into Europes first carbon neutral hotel.

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Acknowledgements

Production of this booklet would not have been possible without the financial and administrative support of the BVCA and NESTA. We would also like to thank all the contributors and the editors for their time, effort and generosity of spirit; in particular Ernie Richardson of MTI Partners, for originating the idea and then delegating all the hard work to everybody else. BVCA The BVCA - The British Private Equity and Venture Capital Association is the industry body for the UK private equity and venture capital industry. Our membership of well over 400 members represents the overwhelming number of UK-based private equity and venture capital firms and their advisers. The BVCA has over 24 years of experience representing the industry, which currently accounts for around 60% of the whole European private equity market, to government, the European Commission and Parliament, the media, regulatory and other statutory bodies at home, across Europe and around the world. We promote the industry to entrepreneurs and investors, as well as provide services and best practice standards to our members.

Copyright The greatest care has been taken in compiling this document. However, no responsibility can be accepted by the publishers or compilers for the accuracy of the information presented. The opinions expressed are those of the authors and these do not necessarily coincide with the views of the BVCA or NESTA. Any information presented in this document may be reproduced, but the authors assert the moral right to be identified as the authors of their work and any reproductions must include complete details of the author, the BVCA and NESTA, fully sourced and acknowledged.

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